Who We Are
Financial and Investment Advisors
We invest family fortunes and help families to grow and prosper harmoniously over the generations. Our observation is that bad life choices erode family fortunes faster and more surely than poor investment returns. Therefore, excellent investment management, for which we strive, is desirable but not sufficient to preserve wealth.
Disciplined investors with a long-term investment horizon
Almost by definition, it is impossible to be better than the majority of investors unless you are first willing to be different:
- We chose to be contrarian because we believe that, as a group, investors can at times become “irrationally exuberant,” and thus dangerous, by blindly following established trends and extrapolating them into the future.
- This trend-following approach can seem successful for relatively short periods of time because trends do tend to sustain themselves temporarily. But at major turning points for the economies and financial markets, crowds usually are severely wrong. This, we believe, is when long-term performance is achieved.
- As a result, if you have elected to behave differently, you will likely appear to be wrong at times. This is why patience and character are essential to contrarian investment success. When a trend or fashion temporarily frustrates our contrarian bias, we will check and recheck our assumptions, armed with a patience that occasionally will resemble stubbornness, but we are unlikely to jump onto the bandwagon.
- In investing, there is a fundamental difference between being right and making money. There are many examples of companies that had everything going for them and yet lost fortunes for investors. Almost always, the reason was their shares’ valuation.
- In the stock market, valuation compares a company’s stock price to measures such as company’s sales, earnings, cash flow or assets, which are used to compute the intrinsic value of a business. Since the price of a stock is the result of a bidding auction by emotional investors, it often deviates from the rationally-estimated value that underlies it.
- If a stock price is well above our estimate of the company’s underlying worth, this reflects broad-based enthusiasm on the part of investors. Any negative news thus has the potential to trigger a disproportionate fall in price. The opposite also holds true: undervalued, neglected stocks can benefit disproportionally from favorable company news.
- We believe that trying to predict the future — particularly its timing – is mostly a futile exercise for portfolio management. For example, it is less useful to guess where the price of oil will be in two or three years than to assess the consequences for companies, economies and financial markets if that price should double or be cut in half.
- Generally, though, we prefer to concentrate on valuation, for which we have a disciplined and rigorous research investment process. We look for out-of-favor companies, where temporary challenges don’t threaten the survival of the business, and recovery or resumption of growth is likely.
- How do we find them at the right price? Many analysts seldom look beyond companies’ two-year outlook. One reason is that consultants and boards of directors of major financial institutions increasingly demand that performance be measured and assessed over ever-shorter periods. But this focus on the short-term opens opportunities for investors like us who are willing to investigate companies’ prospects over somewhat longer time horizons.
- Finally, contrary to the current quantitative fashion, we don’t consider volatility as risk, which we define as the possibility of a permanent loss of capital. This, we strive to avoid. In contrast, we tend to see volatility as opportunity: we take advantage of it to build positions when already-depressed prices fall further.